SEOUL, KOREA - South Korea’s manufacturing sector continued to expand during April, with output, new orders and employment all rising at solid rates since the previous month.
Economic conditions were reported to have strengthened, which supported an improvement in demand, particularly at home, where clients showed an increased willingness to purchase manufactured goods.
The survey also showed a modest reduction in input costs, the first net fall in nine months, as metal prices were reported to have declined. A number of companies passed their lower costs onto clients in the form of discounts, although the rate of reduction was marginal.
The HSBC South Korea Purchasing Managers’ Index™ (PMI®) – a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector – continued to signal steadily improving operating conditions in April. The PMI recorded 52.6, up from 52.0 in March, and has now posted above the 50.0 no-change mark for three successive survey periods. Moreover, the latest PMI reading was the highest for 25 months.
Manufacturing output volumes increased for the second month in a row in April. Growth was solid and the highest seen for a year, as a wider improvement in economic conditions led to a similar sized rise in new orders. There were reports of an increase in demand from major clients. New product releases also supported total sales, which increased at the sharpest pace for 26 months.
Latest data implied that the domestic market was a key driver of growth. Export sales increased, but at a slower pace and one that was below the rate for total new orders. Where foreign
orders rose, panellists signalled that China and Japan were key demand sources.
April’s survey indicated some pressure on capacity, as backlogs of work rose at the fastest rate for 20 months. Manufacturers subsequently shipped directly out of stock wherever possible
to try and satisfy order book requirements. Latest data showed stocks of finished goods declined at the sharpest pace of the year so far.
Higher new orders and increased production requirements also encouraged companies to add to their payroll numbers. April’s survey signalled that staffing levels rose for a fifth successive
month, and at a solid pace.
Purchasing activity also increased, with the rate of growth the sharpest for a year. That said, companies still pared inventories of inputs (albeit to a lesser extent than in previous months).
Finally, the latest survey showed a net fall in input costs for the first time in nine months. Precious and non-ferrous metals were reported to have declined in price since March. Manufacturers passed part of their lower costs onto clients via a reduction in
output charges. There were some reports that ongoing discounting reflected efforts to maintain competitive pricing structures.